Broadband Stimulus Won't Change Much, Firm Says

Some observers seem to have believed the "broadband stimulus" program, as helpful as it will be for some organizations and service providers, would somehow "fix" a "broadband" adoption problem in the rural and some other "underserved" areas of the country. It appears reality is setting in.

"The bottom line is that the stimulus money is going to change any of the access issues," says Robert Rosenberg, Insight Research Corp. president. "It is far to few dollars to make any impact."

But "access" is only part of the "problem." In fact, Insight Research says, there are four different kinds of households that must be considered when looking at broadband "adoption" and "availability," which are quite different issues.

There are households "unable to buy" broadband service, at least from a terrestrial provider (most analysts seem to forget that there are two national providers of satellite broadband). There are households that can buy broadband, but choose to buy dial-up service.

There are households that do not own computers and households that own computers but do not use the Internet.

"I don't want to over-play the 'I can't buy it' issue, says Rosenberge. "Yes there is some of that, but it is also the issue of 'no computers' or 'dial up is fine for me,'" he says.

Insight says 60 million U.S. homes buy broadband access service, while 12.6 million homes buy dial-up access, for a total of 72.6 milliion Internet access buyers.

Insight Research says that if one adds up the households without any broadband service at all, plus dial-up households, perhaps 58 million households, or 49 percent of all U.S. households, potentially are candidates for broadband service and have not yet bought it.

Insight Research estimates that at least 12 million rural and non-urban market households do not have access to any broadband service (terrestrial) due to the lack of supporting terrestrial infrastructure. Given a minimum cost of $1,500 per household, it is easy to see that the price tag for expanding broadband access to 12 million new households could exceed $18 billion.

By definition, the funding available under the broadband stimulus program is just a bit over $7 billion, and that includes funding for middle-mile projects, computing centers and other projects that do not directly add new broadband access capability. In fact, only a theoretical $6.4 billion actually is available for infrastructure.

Insight Research projects that non-governmental funding will provide the majority of the
growth in broadband penetration for the next five years.

With an estimated 40 million households still lacking broadband access by year-end 2014, the $6.4
billion in government funding would allow for an investment of $164 per household to provide broadband access to these non-broadband households.

The availability of such a small investment amount per household casts serious doubt that any significant expansion of broadband access will result from this government action, Insight Research says.

At the current estimate of $1,500 per household, at least $60 billion would be needed to deploy universal broadband access across the United States for 40 million households.

The broadband stimulus will not change much, it appears.